Whistleblower Case Could Widen Into a Chevron Challenge

Oral arguments set for November 28 at the U.S. Supreme Court in a case focusing on the reach of whistleblower protections under the Dodd-Frank Act could also veer into the broader question of how much leeway regulatory agencies have in interpreting federal statutes.

Jordan Thomas, chair of Labaton Sucharow LLP’s SEC whistleblower practice, said Digital Realty’s argument in favor of narrowing the whistleblower definition seemingly runs counter to the best interests of corporate America. Labaton Sucharow describes itself as an “advocate” for SEC whistleblowers, and Thomas is described by the firm as a “principal architect” of the SEC’s whistleblower program while he worked at the agency.

A number of pro-business entities, including the Chamber of Commerce and the Cato Institute, have submitted friend-of-the-court briefs in support of Digital Realty’s case. Thomas said he finds that ironic.

If the Supreme Court determines that employees who report internally aren’t eligible for protections under Dodd-Frank, “sophisticated whistleblowers and their counsel will be compelled to report externally to ensure they have the whistleblower protections,” he said. “This is exactly what corporate America said they didn’t want when the SEC was drafting these rules.”

Thomas said corporate America should welcome incentives for employees to report internally rather than taking their complaints to the SEC, which can lead to potentially costly and embarrassing investigations.

“Digital Realty may win this case but corporate America loses because fewer whistleblowers will speak up,” Thomas said. “This case undermines the culture of integrity within corporate America — if you see something say something.”